Football Benchmark

Tonight the much-awaited quarter-final stage of the UEFA Champions League kicks-off; the four scheduled ties comprise eight teams drawn from the so-called ”big five” leagues. However, within this exclusive group, differences in terms of financial performance are significant. In this article, the KPMG Football Benchmark team compares the business performance of this year’s UEFA Champions League contenders.

In football, it is often assumed that the biggest spenders are more likely to emerge as winners. While this is invariably the case as success breeds success – winning trophies generates higher levels of engagement from fans and the media, which can then be monetised in the form of higher revenues and subsequent investment in the playing squad – however, there are some clubs demonstrating that lower levels of income do not necessarily rule a team out of contention.

In terms of revenues, the three major clubs, namely Real Madrid CF, FC Barcelona and FC Bayern Munich are clearly at the top. There is a significant gap between this trio and the other clubs. For example, the combined operating revenues of Atlètico de Madrid, Leicester City FC and AS Monaco FC (EUR 479 million) is more than EUR 100 million lower than Bayern’s alone. Auch a gulf is partially explained by the top clubs’ ability to exploit their brand internationally and thus generate significant commercial revenues. Conversely, Juventus FC (57%), Atlètico de Madrid (63%), Leicester City FC (73%) and AS Monaco FC (58%), show a heavy dependence on revenues from domestic competition’s broadcasting and UEFA Champions League participation[1].

Higher resources, as mentioned above, can be invested to further strengthen the squad in order to compete on the field of play. Thus, unsurprisingly, there is a correlation between the highest earners and the highest spenders in terms of wages. The only outlier is FC Barcelona, whose wage bill for the 2015/16 season is some 21% higher than the top revenue generator in the same period, Real Madrid CF. However, the examples of Leicester City FC and AS Monaco FC show that it is possible to compete despite lower means.

After a recessive period marked by UEFA Financial Fair Play sanctions, forcing the club to generate profits on the disposal of players, AS Monaco FC have focused on the scouting and developing of future potential stars, aligned to a more sustainable wage structure. Thanks to the likes of Kylian Mbappé (18 years old) and Bernardo Silva (22 years old), Les Monegasques have been the only club to beat an opponent with higher revenues in the Round of 16 (Manchester City FC, EUR 524 million).

On the other hand, Leicester City’s triumphant Premier League campaign in 2015/16 defied financial reality. The Foxes’ expenditure on wages, for example, was 32% and 66% less than title contenders Manchester City FC and Manchester United FC respectively.

The comparison of wages and squad market value also provides relevant insights. One of the most interesting cases is provided by Atlètico de Madrid, especially when compared to Juventus FC. Despite paying out 38% less in wages than the Bianconeri in 2015/16, the Colchoneros have the same squad market value, showing a more efficient spending in this regard. This “smart spending” has helped Atlètico to win the LaLiga title in 2014 and to reach the UEFA Champions League final twice in the past three seasons.

Player trading activity, not taken into account within clubs’ operating revenues and expenditures, is also a key element of a club’s business. A positive balance of player trading is the result of profits from transfers exceeding the annual amortisation of the squad. On the other hand, the more negative the final balance is, the higher the investment the club have committed to enhance their squad.

In this regard (see chart below), when analysing player trading for the last three seasons (2013/14 – 2015/16), the best performers are Borussia Dortmund with a net positive player trading activity of EUR 28 million. Indeed, Borussia have specialised in attracting and developing young talents who they are after forced to sell to domestic and international peers, most notably FC Bayern Munich (such as, for example, Mario Götze), that can afford a more competitive wage bill.

Real Madrid CF are followed, at the bottom of the table, by Juventus FC, FC Bayern Munich and FC Barcelona. Despite being only the 4th club in terms of operating revenues in 2015/16, among the quarter-finalists, in recent seasons the Bianconeri have committed to sustained investment in strengthening the squad over the last few seasons, and these efforts already paid dividends as the club reached the UEFA Champions League final in 2015 for the first time in 12 years and won five successive domestic titles.

As a result of this investment, considering aggregate results of the past three seasons, Juventus FC are the only slightly loss-making club. By contrast, despite being heavy spenders in terms of both wages and player trading, the major three clubs have posted impressive aggregate profits, making them winners not only on the pitch but also in terms of financial performance.

Finally, a look into the club’s Enterprise Value (as per KPMG Football Clubs’ Valuation report) shows that only four of the top 10 most valuable clubs, namely Real Madrid CF (1st), FC Barcelona (3rd), FC Bayern Munich (4th) and Juventus FC (9th) have actually reached the quarter finals of the UEFA Champions League this year. Leicester City FC are absent from last year’s shortlist but, thanks to their successful Premier League campaign, they are strong candidates to appear in this year’s edition.

Despite being far behind in terms of revenues, Borussia Dortmund, Atlètico de Madrid, Leicester City FC and AS Monaco FC are all profitable clubs that have been able to reach the latter stages of the most prominent European competition, unlike some more celebrated names such as Manchester United FC (EUR 688 million revenues), who failed to even qualify this year. However, underlining that financial muscle is not the only variable at play, participation in the UEFA Champions League for clubs of their size and influence is clearly essential in order to maintain competiveness with European football powerhouses.

Further investigation into this and related topics, as well as analysis of industry data, can be undertaken for you by KPMG Sports Advisory Practice. Our subject matter experts can also assist stakeholders in assessing and interpreting the potential impact on their organizations of any particular piece of research, identifying the underlying reasons behind specific trends or developing potential solutions and considering future scenarios.

[1] UEFA money is accounted for within Broadcasting revenues of football clubs.

Sky Football Benchmark

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